You have to think long term

The WSJ today (D1) is telling yield-hungry bond investors to look at stocks. In the article, they compare the fortunes of someone who invested $1mm in Treasury bills back at the end of 1925 and spent only the income with the fortunes of someone who invested the same $1mm, spending only the income, in large cap stocks.

Let's assume they took the safe route, stashing the entire sum in Treasury bills and then left you to live off the interest. In 2006, your income would have been $48,000versus $33,000 in 1926, according to Ibbotson Associates, a unit of Chicago investment researchers Morningstar. Trouble is, because of inflation, $1 of interest in 2006 had less than a tenth of the spending power of $1 in 1926.

Now, imagine instead that your parents rolled the dice and plunked the $1 million in large‐company stocks. If you spent the dividends but didn't sell any shares, you would have pocketed a robust stream of income that climbed in 65 years and fell in just 15, Ibbotson calculates.

Even more impressive, your $1 million would have ballooned to $111 million over the 81 years ‐‐ and your income would have jumped from $54,000 in 1926 to almost $2 million in 2006. Indeed, your income would have grown at an average 4.6% a year, easily outpacing inflation's 3.1%.


Cash Back
Some U.S. stocks boast higher yields than 10-year Treasury notes.
Dow Jones Industrial Average 2.3%
High-dividend Dow Stocks 4.2%
10-year Treasury notes 3.9%